In order to boost retail participation in the debt market, industry body Assocham Monday proposed various steps, including permission to market bonds like other traded financial instruments and providing tax exemptions.
New Delhi: In order to boost retail participation in the debt market, industry body Assocham Monday proposed various steps, including permission to market bonds like other traded financial instruments and providing tax exemptions.
In a report published by Assocham and Resurgent India titled "Retail Investors- The game changer", the industry body proposed the government should also ease investment cap on Foreign Institutional Investors (FIIs) to increase inflows in the Indian debt market.
The government should allow bonds to be marketed like other traded financial instruments which can be easily available for retail participation, Assocham said.
Currently, retail investors can access debt market only through FMP's (Fixed Maturity Plan) route as minimum ticket size for debt securities are usually very high and primary market for fixed income instruments is not as accessible as equity.
Assocham further said the government can push bonds by incentivising them and providing tax exemptions.
The industry body proposed the introduction of Inflation indexed bonds, interest rate options etc which can provide a good hedging options to investors during inflation.
It said banks should be asked to guarantee corporate bonds to increase confidence among investors
Also, it proposed that the government should launch programmes at school level to educate students about different avenues of investment.
Currently, the Indian debt markets has an total outstanding value close to Rs 30 lakh crore (about USD 545 billion) which mainly consist of government securities.
"...Indian Bond market is still in premature stage in comparison to its European and American counterparts. In mature markets viz. American and European stock markets, there are varieties of trading instrument and investment product. Out of this debt market has emerged as largest market in terms of turnover.
"Exchanges have introduced many debt products which are now available in Indian markets but lack of retail participation often makes the products unsuccessful," according to the report.